[Federal Register Volume 82, Number 4 (Friday, January 6, 2017)]
[Notices]
[Pages 1764-1766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-32053]


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POSTAL REGULATORY COMMISSION

[Docket No. ACR2016; Order No. 3717]


FY 2016 Annual Compliance Report

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Postal Service has filed an Annual Compliance Report on 
the costs, revenues, rates, and quality of service associated with its 
products in fiscal year 2016. Within 90 days, the Commission must 
evaluate that information and issue its determination as to whether 
rates were in compliance with title 39, chapter 36, and whether service 
standards in effect were met. To assist in this, the Commission seeks 
public comments on the Postal Service's Annual Compliance Report.

DATES: Comments are due: February 2, 2017.
    Reply Comments are due: February 13, 2017.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov. Those who cannot submit comments 
electronically should contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section by telephone for advice on filing 
alternatives.

FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 
202-789-6820.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Overview of the Postal Service's FY 2016 ACR
III. Procedural Steps
IV. Ordering Paragraphs

I. Introduction

    On December 29, 2016, the United States Postal Service (Postal 
Service) filed with the Commission, pursuant to 39 U.S.C. 3652, its 
Annual Compliance Report (ACR) for fiscal year (FY) 2016.\1\ Section 
3652 requires submission of data and information on the costs, 
revenues, rates, and quality of service associated with postal products 
within 90 days of the closing of each fiscal year. In conformance with 
other statutory provisions and Commission rules, the ACR includes the 
Postal Service's FY 2016 Comprehensive Statement, its FY 2016 annual 
report to the Secretary of the Treasury on the Competitive Products 
Fund, and certain related Competitive Products Fund material. See 
respectively, 39 U.S.C. 3652(g), 39 U.S.C. 2011(i), and 39 CFR 3060.20-
23. In line with past practice, some of the material in the FY 2016 ACR 
appears in non-public annexes.
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    \1\ United States Postal Service FY 2016 Annual Compliance 
Report, December 29, 2016 (FY 2016 ACR). Public portions of the 
Postal Service's filing are available on the Commission's Web site 
at http://www.prc.gov.
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    The filing begins a review process that results in an Annual 
Compliance Determination (ACD) issued by the Commission to determine 
whether Postal Service products offered during FY 2016 were in 
compliance with applicable title 39 requirements.

II. Overview of the Postal Service's FY 2016 ACR

    Contents of the filing. The Postal Service's FY 2016 ACR consists 
of a 94-page narrative; extensive additional material appended as 
separate folders and identified in Attachment One; and an application 
for non-public treatment of certain materials, along with supporting 
rationale, filed as Attachment Two. The filing also includes the 
Comprehensive Statement,\2\ Report to the Secretary of the Treasury, 
and information on the Competitive Products Fund filed in response to 
Commission rules. This material has been filed electronically with the 
Commission, and some also has been filed in hard copy form.
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    \2\ In years prior to 2013, the Commission reviewed the Postal 
Service's reports prepared pursuant to 39 U.S.C. 2803 and 39 U.S.C. 
2804 (filed as the Comprehensive Statement by the Postal Service) in 
its ACD. However, as it did last year, the Commission intends to 
issue a separate notice soliciting comments on the comprehensive 
statement and provide its related analysis in a separate report from 
the ACD.
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    Scope of the filing. The material appended to the narrative 
consists of: (1) Domestic product costing material filed on an annual 
basis summarized in the Cost and Revenue Analysis (CRA); (2) comparable 
international costing material summarized in the International Cost and 
Revenue Analysis (ICRA); (3) worksharing-related cost studies; and (4) 
billing determinant

[[Page 1765]]

information for both domestic and international mail. FY 2016 ACR at 2. 
Inclusion of these four data sets is consistent with the Postal 
Service's past ACR practices. As with past ACRs, the Postal Service has 
split certain materials into public and non-public versions. Id. at 2-
3.
    ``Roadmap'' document. A roadmap to the FY 2016 ACR can be found in 
Library Reference USPS-FY16-9. This document provides brief 
descriptions of the materials submitted, as well as the flow of inputs 
and outputs among them; a discussion of differences in methodology 
relative to Commission methodologies in last year's ACD; and a list of 
special studies and a discussion of obsolescence, as required by 
Commission rule 3050.12. Id. at 3.
    Methodology. The Postal Service states that it has adhered to the 
methodologies historically used by the Commission subject to changes 
identified and discussed in Library Reference USPS-FY16-9 and in 
prefaces accompanying the appended folders. Id. at 4. The Postal 
Service notes that one noteworthy methodological change regarding 
product costs was discussed by the Commission in Order No. 3506.\3\ 
Going forward, the Postal Service's calculation of attributable costs 
will be changing to include a product's inframarginal costs developed 
as part of the estimation of a product's incremental costs. FY 2016 ACR 
at 4. However, the Postal Service states that several complications 
associated with the change have precluded it from including the new 
inframarginal cost component into the CRA this year. Id. at 5-7. 
However, it has included additional information, including estimates on 
product specific incremental costs, to Library Reference USPS-FY16-
NP10. It has also created a new library reference, USPS-FY16-43, to 
present the incremental costs for market dominant products. Id. at 7-8.
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    \3\ Id.; see Docket No. RM2016-2, Order Concerning United Parcel 
Service, Inc.'s Proposed Changes to Postal Service Costing 
Methodologies (UPS Proposals One, Two, and Three), September 9, 2016 
(Order No. 3506).
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    Market dominant product-by-product costs, revenues, and volumes. 
Comprehensive cost, revenue, and volume data for all market dominant 
products of general applicability are shown directly in the FY 2016 CRA 
or ICRA. Id. at 11.
    The FY 2016 ACR includes a discussion by class of each market 
dominant product, including costs, revenues, and volumes, workshare 
discounts, and passthroughs responsive to 39 U.S.C. 3652(b), and FY 
2016 incentive programs. Id. at 12-66.\4\
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    \4\ The Postal Service states that it ``would be inefficient and 
unduly disruptive . . . to immediately adjust prices to correct 
passthroughs that exceed 100 percent.'' Id. at 11. It further states 
its intent to address such passthroughs in its next general price 
adjustment. Id.
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    In response to the Commission's FY 2010 ACD directives, the Postal 
Service states that it is providing information regarding: (a) All 
operational changes designed to reduce flats costs and the estimated 
financial effects of such changes (id. at 27-34); (b) all costing 
methodology improvements made in FY 2016 \5\ and the estimated 
financial effects of such changes (id. at 27-31); and (c) a statement 
summarizing the historical and current year subsidy of the flats 
product (id. at 36-38). In addition, the Postal Service states that in 
the next general market dominant price change, it plans to increase the 
price of Standard Mail Flats by at least CPI times 1.05. Id. at 37. In 
the FY 2015 ACD, the Commission directed the Postal Service to submit a 
report addressing several topics related to Periodicals pricing.\6\ The 
Postal Service states that it provided a response to that directive on 
July 26, 2016. FY 2016 ACR at 53. Additionally, the Postal Service 
provides an updated version of the Periodicals pricing report in 
Library Reference USPS-FY16-44. Id.
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    \5\ The Postal Service notes that, in FY 2016, no rulemaking 
dockets resulted in costing methodology changes affecting Standard 
Mail Flats costs. Id. at 34. However, the Postal Service discusses 
several related developments required to foster a better 
understanding of the observed trend in reported costs for Standard 
Mail Flats. Id. at 34-36.
    \6\ See Docket No. ACR2015, Annual Compliance Determination, 
March 28, 2016, at 23-24 (FY 2015 ACD).
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    Flats directive. The Postal Service notes that the Commission 
directed the Postal Service to submit a detailed report addressing the 
measurement of cost and service performance issues for flat-shaped 
products in the FY 2015 ACD.\7\ The Postal Service states that its 
initial report addressing flats issues was filed on July 26, 2016, and 
additional responses were provided by the Postal Service in response to 
a Commission Information Request. FY 2016 ACR at 54.
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    \7\ Id.; see Docket No. ACR2015, FY 2015 ACD at 180-181.
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    Market dominant negotiated service agreements. The FY 2016 ACR 
presents information on the PHI Acquisitions, Inc. negotiated service 
agreement, the only market dominant negotiated service agreement in 
effect in FY 2016. Id. at 64-66.
    Service performance. The Postal Service notes that the Commission 
issued rules on periodic reporting of service performance measurement 
and customer satisfaction in FY 2010. Responsive information appears in 
Library Reference USPS-FY16-29. Id. at 67.
    Customer satisfaction. The FY 2016 ACR discusses the Postal 
Service's approach for measuring customer experience and satisfaction; 
describes the methodology; presents a table with survey results; 
compares the results from FY 2015 to FY 2016; and provides information 
regarding customer access to postal services. Id. at 70-81.
    Competitive products. The FY 2016 ACR provides costs, revenues, and 
volumes for competitive products of general applicability in the FY 
2016 CRA or ICRA. For competitive products not of general 
applicability, data are provided in non-public Library References USPS-
FY16-NP2 and USPS-FY16-NP27. Id. at 82. The FY 2016 ACR also addresses 
the competitive product pricing standards of 39 U.S.C. 3633. Id. at 82-
90.
    Market tests; nonpostal services. The Postal Service discusses the 
four competitive market tests conducted during FY 2016, and nonpostal 
services. Id. at 91-92.

III. Procedural Steps

    Statutory requirements. Section 3653 of title 39 requires the 
Commission to provide interested persons with an opportunity to comment 
on the ACR and to appoint an officer of the Commission (Public 
Representative) to represent the interests of the general public. The 
Commission hereby solicits public comment on the Postal Service's FY 
2016 ACR and on whether any rates or fees in effect during FY 2016 (for 
products individually or collectively) were not in compliance with 
applicable provisions of chapter 36 of title 39 (or regulations 
promulgated thereunder). Commenters addressing market dominant products 
are referred in particular to the applicable requirements (39 U.S.C. 
3622(d) and (e) and 39 U.S.C. 3626); objectives (39 U.S.C. 3622(b)); 
and factors (39 U.S.C. 3622(c)). Commenters addressing competitive 
products are referred to 39 U.S.C. 3633.
    The Commission also invites public comment on the cost coverage 
matters the Postal Service addresses in its filing; service performance 
results; levels of customer satisfaction achieved; and such other 
matters that may be relevant to the Commission's review.
    Access to filing. The Commission has posted the publicly available 
portions of the FY 2016 ACR on its Web site at http://www.prc.gov.

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    Comment deadlines. Comments by interested persons are due on or 
before February 2, 2017. Reply comments are due on or before February 
13, 2017. The Commission, upon completion of its review of the FY 2016 
ACR, comments, and other data and information submitted in this 
proceeding, will issue its ACD.
    Public Representative. James Waclawski is designated to serve as 
the Public Representative to represent the interests of the general 
public in this proceeding. Neither the Public Representative nor any 
additional persons assigned to assist him shall participate in or 
advise as to any Commission decision in this proceeding other than in 
their designated capacity.

IV. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. ACR2016 to consider 
matters raised by the United States Postal Service's FY 2016 Annual 
Compliance Report.
    2. Pursuant to 39 U.S.C. 505, the Commission appoints James 
Waclawski as an officer of the Commission (Public Representative) in 
this proceeding to represent the interests of the general public.
    3. Comments on the United States Postal Service's FY 2016 Annual 
Compliance Report to the Commission are due on or before February 2, 
2017.
    4. Reply comments are due on or before February 13, 2017.
    5. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Stacy L. Ruble,
Secretary.
[FR Doc. 2016-32053 Filed 1-5-17; 8:45 am]
 BILLING CODE 7710-FW-P